Episode #0119 - What is Value Culture?

Pricing College Podcast

Today's episode is a bit like Part B or a follow-up from our last episode a couple of weeks ago, where we introduced our new project, which we're calling Value Culture.

TIME-STAMPED NOTES:

[00:00] Introduction

[03:05] Why do not all companies have specialised pricing experts or teams?

[4:35] What can Value Culture do?

[10:19] What can clients benefit from Value Culture?

[11:17] The Ultimate Objective And The Essence Of Value Culture

What is Value Culture?

Aidan: Hello, and welcome to another edition of Pricing College with your hosts, Aidan Campbell. And

Joanna: Joanna Wells.

Aidan: Today's episode is a bit like Part B or a follow-up from our last episode a couple of weeks ago, where we introduced our new project, which we're calling Value Culture. But I suppose in this episode, I wanted to ask Joanna, really, why is this sort of project happening? What did we see?

Why did we think companies needed this sort of product? Like, what is the need or what is the problem that a lot of businesses, smaller businesses and, you know, medium-sized businesses, are facing?

Joanna: Yeah, that's right. I mean, primarily, what we are doing is creating and implementing an essentially commercial platform called Value Culture, which is really aimed, as you said, at small and medium-sized businesses and enterprise businesses too.

And the reason that we have done this, and we're calling it a platform; it is a tech platform and not traditional consulting, is because we saw the mass need, the scale of the need of smaller, medium-sized businesses. Considering that about 98% of all businesses in Australia are small to medium-sized businesses.

In terms of the problem, we've seen consistently when we're speaking to startups, SMEs, medium-sized businesses, privately owned businesses, and then your ASX listed and Fortune 500s’ very common problems with pricing that we want to solve.

And ultimately, as you know, the problem was quite simple.

People feel that price can be something that is added at the end of a list of commercial tasks. For instance, when you're launching a new product, often the assumption is that it's okay. We can just set any price and then adjust that price later without really understanding the data inputs required to set pricing, the different pricing methodologies out there, and the metrics that they need to prepare and track along the way. And as you know, customer price response has a significant impact on your ability to change prices. Essentially, once you have your prices out there in the market, it's very difficult to change prices.

And often when people do that, companies small to large, when they just do that guesswork pricing or cost plus, they regret it because they end up essentially either overcharging their customers or losing revenue and volume.

You know, even selling below cost when they've got such great businesses essentially means they're undervaluing their proposition.

Aidan: I suppose, you know, here at Taylor Wells, one of the things I'd be very aware of, you know, on this podcast we've spoken many times about how getting a pricing person in really will give benefits to a company. But I think, you know, we're realists as well, and we're completely aware that if your business is doing a million Australian dollars in revenue, you know, you probably cannot afford, like, let's be honest, to go out and pay someone a hundred grand who's a high performer in pricing.

So I think, you know, there's a real gap in the market there. The vast majority of companies are small. As you said, Joanna, and I agree with that, there's a real gap whereby, in smaller companies, people tend to be doing multiple tasks. People tend to not be specialists, and the people often put their hand up and suffer the most stress and go, “Oh, I need some guidance on pricing. Can somebody help me today?” They fall into a trap, a gap, I guess, whereby they're not big enough revenue-wise to finance. A specialist, and to be honest, they're also, you know, there's not much point in getting consultancy for them either because there's nobody internally who could be dedicated.

Joanna: Oh yeah. Look, that's a great point, and that's a big part of the problem too. Pricing then just becomes this quite onerous task that puts real pressure on people who are really out of their depth and don't know where to start, what to do, or how to move forwards with pricing.

And really, what Value Culture does is give them that start, that ability to forge ahead when things are very unclear, the starting point, and then moving forwards, learning things step by step, getting the simple things mastered first before tackling the bigger, bigger things.

And then, step by step, feeding the right information in the right direction, whether that's in terms of getting the right inputs, data inputs, and information inputs together for price analysis and cost analysis or what, or whether it's more, okay, we need to learn different types of pricing methodology to set pricing, whatever the key area of the problem is.

Value Culture can give that first start and then move people along their journey.

So all of the pricing plans are customised to a roadmap that makes sense for that business. Those roadmaps are very closely aligned with business strategy. And then, if there are requirements to pressure test business strategy, Value Culture can go back to basics with strategic plans too, just to make sure that they're actually resonating in terms of the market and are indeed right for the business.

And then again, once that's solid and done correctly, we can start the process with pricing, get the roadmaps in order, get the individual team plans, get the individual plans, and then before you know it, it's different people in the business, say if it's a medium-sized business, or knowing how they're feeding into pricing, whether that's a price rise implementation or a new price for a product or even a tenderer, or even if it's thinking about how to simplify a very complex legacy system to make more revenue and to ensure pricing above costs.

Aidan: Just listening to you there, Joanna, it sort of reminds me of the Pareto principle, which I think I'd heard of once, and don't quote me on what that actually means, but I believe it's like the 80/20 rule or the 90/10 rule.

You know what I really do think? There's a real gap in the market whereby people will get a huge amount of benefit; they'll get 80% of the benefit, by doing the simple things first.

Like there's a whole echelon of companies out there who are doing no pricing, right? like zero. And I don't think we're proposing that these companies will be jumping on day one to perfect pricing and apple style, you know, maximising profitability.

But I think you will get 80% of the benefits with small amounts of work, but where I really see the value, you know, in the way you're describing it, there is, it's just a format, it's a structure. It's like when people go to the gym and have no idea what they're doing. Oftentimes, they can just waste their time, for years.

If somebody sensible gives you a very simple programme, it's better to take simple steps that are concrete and get you in the right direction, and you're making real progress. And I think, you know, if this project can do that, I think there's a real, you know, benefit.

Joanna: Yeah, I think you're right. I mean, when you were speaking there, it just reminded me of numerous case studies where people go, and what we need, is to fix pricing. Get me that right price.

And they just focus on that because they actually don't want to get into the bigger problem, which could be not enough volume, not enough leads coming through the website, which could be a mess.

There aren't the right online quote tools to really inform and educate customers on the pricing. There's no value proposition. It's an ill-conceived value proposition. So rather than think about that, there's no understanding of pricing and its impact on the P&L. Costs could be everywhere. There's no sort of understanding of different cost centres. So often they go, "Okay, but that's too much of a difficult problem to solve." What we need is just the right price. Because if you increase pricing, we'll make a significant profit improvement.

And that would be enough to save this quarter and keep the business afloat. But not necessarily, because you've got to think of the pricing and its impact on the customers. You can't just overcharge customers because you haven't got enough of them to lose the very customers that you've already got.

Does your offer really warrant that price increase? Or are you underpricing? So Aidan, when you say that, yes, you've really got, when you start with pricing, what we find is the big epiphany, um, with both small and medium and large businesses, is that pricing is bigger than the price point that you set, right?

You can't just make it up. You've really got to think about your whole business. From costs to marketing online. You've got to think about your positioning and approach. You've got to think about your business strategy. And you've got to get all your ducks in order. You've got to know how many leads you're getting. You've got to know your quote-to-book ratios and things like that. And these are highly valuable inputs to a price model, so it's not wasting time going through each of those things in detail or as much as you can as you get that information through. Because remember, you can't do it all at once.

It is a journey, but each of those steps is valuable, and in the end, you will get a price model that is absolutely customised for your business. And you probably think, wow, at the beginning of this journey, I've had so many people say that at the beginning of this journey, I never thought I'd be covering so much ground.

I just didn't realise it. And look at this. Now we've got a price model that I understand and can clearly articulate to the directors and the board. It's making money for the business. There's ongoing recurring cash flow. I mean, this is a good news story, and it doesn't happen over and over. But each of those individual tasks and successes helps and gets you that one step closer to that peace of mind, feeling less pressure, and feeling good about what you've done and what you've done for the business because you actually generated value for the business and even more so value for your customers.

Aidan: Yeah, look, I think just the way you're describing it, what I'm looking forward to seeing is just keeping it simple. Giving people who are coming in, who are time poor, who are, you know, often, maybe they're owner-managers, maybe they're people who are running their own business, maybe they're feeling the pressure and it's on their to-do list that they got this year.

Take a look at the pricing and take this system. Hopefully, you can help them do that. So yeah, I'm looking forward to that. Do you have anything else to add, Joanna?

Joanna: Yeah. I mean, again, keeping it simple is so important because yeah, people are very busy and especially from a small business and you're tasked with pricing, and you really are out for your debts, but you want to pursue that.

You need to keep it simple. And with Value Culture, this is what we've done.

As I mentioned at the beginning, it's an online platform. There's a highly sophisticated project management system that we can use for businesses to make decisions and plan. Simple. So everybody knows what they're doing at what time, and if they don't know what they're doing, there are templates.

There are guidelines and dashboards, and for each different stakeholder, there are dashboards, tracking dashboards and results, price, and performance dashboards. So every step of the journey. Full visibility, absolute simplicity. And then, at the end of the quarter, you can see the results.

Aidan: Super. When is this available? I want it right now. He says...

Joanna: Oh yeah. Look, it's been a process of hard work getting this together, but yes, look, it's available. It's been created, and we're implementing it with our clients. So look, if you want any more information about Value Culture for small and medium-sized businesses or if you're interested at an enterprise level, we can certainly give you a demo, run you through it, and talk about it in more detail. But, yeah, look, we're super excited about Value Culture. We highly believe that's serving a great need in a core market. And we just look forward to sharing that all with you. Thank you for listening.

Aidan: Thank you and have a great weekend. Bye for me.

Joanna: Goodbye.